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Strategic Profit Model

This document outlines a strategic profit model that shows the key relationships between a company's net profit, sales, expenses, assets, and financial metrics. It defines net profit margin as net profit divided by net sales and return on assets as net profit divided by total assets, which can also be calculated as net profit margin multiplied by asset turnover. The model illustrates how various expenses, assets, and financial leverage impact a company's net profit and return on investment.

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159 views2 pages

Strategic Profit Model

This document outlines a strategic profit model that shows the key relationships between a company's net profit, sales, expenses, assets, and financial metrics. It defines net profit margin as net profit divided by net sales and return on assets as net profit divided by total assets, which can also be calculated as net profit margin multiplied by asset turnover. The model illustrates how various expenses, assets, and financial leverage impact a company's net profit and return on investment.

Uploaded by

th3hackerssquad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Strategic Profit Model

Sales
Gross -
margin
Net profit Net COGS
Net sales profit -
Net profit ÷ Variable
Margin % expenses
Total
Sales
expenses +
Fixed
expenses
Return on Financial Return on
= x Times
Net worth Leverage Assets %

Net profit
Sales Inventory
Total assets
+
Asset
turnover
÷ Current Accounts
assets receivable
Total
Net sales
assets + +
Total assets Fixed Other
assets assets
Key relationships
• Net Profit = Revenue - Expenses
• Net Profit Margin = Net Profit / Sales
• Total Assets = (Inventory + Accounts Rec + Other current Assets) +
Fixed Assets
• Asset Turnover = Sales / Total Assets
• Return on Assets
= Net Profit Margin x Asset Turnover
= Profit / Total Assets

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